Vat and sales tax treatment for returns and cancellations

Hey Everyone,

I'd be glad if someone can answer my query regarding treatment of sales tax for an ecommerce website when they get a return and a customer wants to exchange an item with the previous one for the same, lower or higher value.

Before posting here, I did a bit of research. Read Myntra's return policy and found this:

"In case of returns, we will credit the amount you paid for the products as cashback into your Myntra cashback account."
"Only size exchanges are allowed. Items can be exchanged for a similar size or a different size."
"You can exchange an item purchased from Myntra.com for a new size or the original size for no extra charge, Please note that we are only able to offer size exchanges"
"If you wish to exchange your item for an alternative product, we suggest that you return it to obtain a cash-back refund and purchase the new item separately."

Above are the 4 important points i found in their return policy.

With that they mean, they would only exchange the item with same SKU. (Size changes are acceptable), But if a user wants to exchange the product with some other product they would provide cashback points and then those cashback points would be adjusted against the new item purchased.

Now here's my doubt:

Say customer x purchases an item from me for Rs1000, with that i'll pay VAT to governemt accordingly. Now he plans to exchange the item with something else for what so ever reason, because i have recieved money for that product the sale coming back to me would be counted as sales return, on which i would ask for refund VAT from government. I would now give those Rs1000 to customer in his account as cashback.

P.S: I have recieved the product, I still have the cash and i have still not paid sales tax (Vat) to governemt as i got the return.

Now when this customer purchases Item y from my website how should the invoice appear, i cannot treat those Rs 1000 as discount. As i can't keep changing the price of the item for every return. Can i mention advance adjust or terms like cashback in the invoice?

Even if i use that how would i show the total? Total of the item cannot be 0. What'll be the tax treatment here?

Please find the attached copy of my invoice this is how a normal invoice looks.

Attached File : 1366924 1412353 invoice.pdf downloaded: 190 times

Originally posted by : sesha
	we can deal this in three cases, 1)first they did not put sales tin no on their invoice, 2) secondly u can just treat as stock transfer/ goods returns.

Hey,

Thanks for the reply. That's what i would be doing. I get the product back i treat that as return and ask for the reimbursement of VAT from governement. Now i have those Rs 1000 of customer as prepayment or advance, which would be later used buy him to purchase something else.

Say later he purchases a product worth of 500, becuase he had Rs 1000 in his account he does not need to pay anything but as I'm making sales i would need to give sales tax to governemt on that sale.

But we know, we can't show the invoice of 0 value, So how i would manage my invoice in that scenario? Should i create another column which says advance adjusted or something similar?

That's what my real question is, how would i show that on my invoice.